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Texas independent oil and natural gas company Diamondback Energy $FANG reported better than expected second quarter earnings after the market close Tuesday. $FANG increased full year production guidance while decreasing CAPEX and cash cost guidance. 

$FANG reported alongside other shale plays EOG Resources $EOG and Devon Energy $DVN. Diamondback operates and explores its onshore oil and natural gas reserves in the major oil producing Permian Basin in West Texas. 

Earnings: Net income of $158 million, or $1.61 per diluted share (adjusted net income of $137 million, or $1.40 per diluted share). Expected EPS profit of 92 cents, revenue up to $266.8 million.

Reaction: Diamondback Energy Inc NASDAQ: FANG After-hours97.65 +2.30 (+2.41%)

HIGHLIGHTS 

  • Q2 2017 production of 77.0 Mboe/d (75% oil), up 25% over Q1 2017 (15% organic growth)
  • Q2 2017 cash operating costs of $7.66/boe, including LOE of $4.14/boe, cash G&A of $0.82/boe and taxes and transportation of $2.70/boe
  • Two ReWard Wolfcamp A wells had average peak 30-day flowing 2-stream initial production ("IP") rates of 191 boe/d per 1,000' (83% oil)
  • First completed Upper Wolfcamp A well in Pecos County had peak 30-day flowing IP rate of 219 boe/d per 1,000' (85% oil)
  • First completed Lower Second Bone Spring well in Pecos County had peak 30-day flowing IP rate of 190 boe/d per 1,000' (91% oil)

Guidance

  • Increasing full year 2017 production guidance to 74.0 - 78.0 Mboe/d, up 5% from prior full year guidance midpoint
  • Lowering full year 2017 CAPEX guidance to $800 - $950 million from $800 million - $1.0 billion previously
  • Lowering full year 2017 LOE guidance to $3.75 - $4.75 per boe and cash G&A to $0.75 - $1.25 per boe

Travis Stice, Chief Executive Officer of Diamondback stated ."Diamondback has continued to build on its strong execution track record by increasing full year production guidance while decreasing CAPEX and cash cost guidance. We believe these results continue to affirm the strength of our business plan. Today we are positioned with acreage and well locations that provide many years of visible production growth. Our growth rate is determined by returns to shareholders, without reliance on the capital markets to fund our development plan. Our balance sheet remains strong and provides us the operational flexibility to increase and decrease activity as commodity price dictates, allowing us to grow differentially within cash flow. "We are impressed with the initial operated results out of the Wolfcamp A in the Southern Delaware Basin, and are extremely excited about our initial Second Bone Spring result on our Pecos acreage, providing us another zone that can compete for capital in our current portfolio. We will continue to lower well costs in the Delaware Basin with our organization's relentless focus on capital efficiency and full cycle economics."

Diamondback doubled their our Tier 1 acreage in the second half of 2016 and shifted them to focus on execution. This has allowed them to benefit from the stronger oil prices through 2017 and convert resource into cash flow.

They expanded into the Southern Delaware Basin marks and back in February were able to guide higher with 65% production growth at the midpoint. 

- 189,000+ net acres in the Permian Basin:

- Northern Midland Basin: ~88,000 net surface acres

- Southern Delaware Basin: ~101,000 net surface acres

- Over 4,300 gross horizontal locations with average laterals of over 8,300 ft. economic at today’s prices(4)

Diamondback Investor Update May 2017

 

Viper Subsidiary Update - Investor Note

Q1 2017 production up 8% and realized prices up 9%; cash distributions of $0.302 per unit, up 17% over Q4 2016 and the highest in Viper’s history

  •  Variable Rate MLP structure: 100% of all available cash is returned to unitholders
  •  Focused on mineral acquisitions in oil-weighted basins with high visibility towards active development
  •  Continued robust A&D activity: 28 deals closed in Q1, adding 102 net royalty acres (100% FANG-operated)

Subsidiary of Diamondback Energy Viper Energy Partners LP Public Offering of Common Units

Viper Energy Partners LP $VNOM ("Viper"), a subsidiary of Diamondback Energy, Inc. $FANG ("Diamondback") priced Viper's upsized public offering of 14,000,000 common units representing limited partner interests. The total gross proceeds of the offering (before underwriters' discounts and commissions and estimated offering expenses) will be approximately $206.5 million. The underwriters have a 30-day option to purchase up to an additional 2,100,000 common units from Viper.

The offering is expected to close on July 21, 2017, subject to customary closing conditions. Viper intends to use the net proceeds from the offering, including any net proceeds from the underwriters' exercise of their option to purchase additional common units, to repay the outstanding borrowings under Viper's revolving credit facility, to fund a portion of the purchase price for its pending acquisitions and for general partnership purposes, which may include additional acquisitions.

In the public offering, Diamondback has agreed to purchase from the underwriters 700,000 common units, an affiliate of Viper's general partner has agreed to purchase from the underwriters 3,000,000 common units and certain officers and directors of Diamondback and Viper's general partner have agreed to purchase from the underwriters 114,000 common units, in each case at the price per common unit paid by the underwriters to Viper.

About DiamondBack Energy

Diamondback Energy is an independent oil and natural gas company headquartered in Midland, TX. Diamondback’s growth strategy is focused on the acquisition, development, exploration and exploitation of unconventional, long-life, onshore oil and natural gas reserves in the major oil producing Permian Basin in West Texas. The Company’s operations are directed primarily at the large acreage areas of the Clearfork, Spraberry, Wolfcamp, Cline, Strawn and Atoka formations, collectively known as the Wolfberry Trend.

Diamondback Energy is an independent oil and natural gas company headquartered in Midland, TX. Diamondback’s growth strategy is focused on the acquisition, development, exploration and exploitation of unconventional, long-life, onshore oil and natural gas reserves in the major oil producing Permian Basin in West Texas. The Company’s operations are directed primarily at the large acreage areas of the Clearfork, Spraberry, Wolfcamp, Cline, Strawn and Atoka formations, collectively known as the Wolfberry Trend.

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